Elliott Waves Can Be Your Crystal Ball In Forex Trading

Do you know this fact that if you are not using the Elliot Wave Principle in your forex trading, you are making a mistake. Elliott Waves can be used to help capture the big moves in the market with surgical precision making a lot of pips for you. So, if you have been ignoring Elliott Waves, this is the time to learn and master them.

Elliott Wave Principle was discovered by Mr. Elliott in the late 1930s while studying the price patterns in the historical stock markets. He found an intriguing price pattern to be repeating over and over again in the stock market historical data that he had. He called it the Wave Principle. Now, this wave principle can be used by the day trader, swing traders as well as the position traders in their trading.

An Elliot Wave Cycle comprises of eight waves that are used to describe a market move from bullish to bearish or from bearish to bullish. Five of these waves are in the direction of the main trend and are called the Impulse Waves. The remaining three are against the direction of the main trend or counter to the main trend and are called Corrective Waves. This eight wave cycle is repeating in the market over and over again.

Now each wave is a smaller sub wave on the wave structure adhering to this 5/3 rule meaning 5 impulse waves and 3 corrective waves. So, each wave pattern exists in the context of a larger wave pattern as well as encompassing smaller wave patterns.

Wave one is the shortest impulse wave. Wave two is a corrective wave that should never reach the start of the wave one.

Now the new trend is well entrenched in the market making the Wave Three the strongest and the longest. Wave Four is again a corrective wave while Wave Five represents the peak of the bullish or the bearish sentiment in the market.

It is important for you to understand that Elliott Wave Principle can be applied on all time frames whether you trade intraday or longer term.

Mr. Ahmad Hassam has done Masters from Harvard University. Get this highly profitable Magic Breakout Forex Strategy by Tim Trush and Julie Lavrin FREE. Get these Correlation Trading Cheatsheets FREE.